Defending American Jobs and Investment Act
This bill provides for the enforcement of remedies against foreign countries that have extraterritorial or discriminatory taxes.
Specifically, the bill requires the Department of the Treasury to periodically submit a report to Congress that lists each foreign country that has one or more extraterritorial or discriminatory taxes.
Treasury must commence enhanced bilateral engagement with each foreign country included in the report. This engagement must (1) express the concern of the United States with respect to the adverse trade and economic effects of tax policies that violate bilateral tax treaties and international tax norms, (2) urge the repeal of extraterritorial and discriminatory taxes that target U.S. persons, and (3) advise the foreign country of remedial actions (as outlined by this bill).
The bill increases income tax and withholding tax rates on certain foreign citizens, corporations, and partnerships of any foreign country listed in Treasury's report.
The bill provides the executive branch with additional tools to enforce against extraterritorial and discriminatory taxes. These tools include
[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3665 Introduced in House (IH)]
<DOC>
118th CONGRESS
1st Session
H. R. 3665
To provide an enforcement of remedies against the extraterritorial
taxes and discriminatory taxes of foreign countries.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
May 25, 2023
Mr. Smith of Missouri (for himself, Mr. Buchanan, Mr. Smith of
Nebraska, Mr. Kelly of Pennsylvania, Mr. Schweikert, Mr. LaHood, Mr.
Wenstrup, Mr. Arrington, Mr. Ferguson, Mr. Estes, Mr. Smucker, Mr.
Hern, Mrs. Miller of West Virginia, Mr. Murphy, Mr. Kustoff, Mr.
Fitzpatrick, Mr. Steube, Ms. Tenney, Mrs. Fischbach, Mr. Moore of Utah,
Mrs. Steel, Ms. Van Duyne, Mr. Feenstra, Ms. Malliotakis, and Mr.
Carey) introduced the following bill; which was referred to the
Committee on Ways and Means, and in addition to the Committee on
Oversight and Accountability, for a period to be subsequently
determined by the Speaker, in each case for consideration of such
provisions as fall within the jurisdiction of the committee concerned
_______________________________________________________________________
A BILL
To provide an enforcement of remedies against the extraterritorial
taxes and discriminatory taxes of foreign countries.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Defending American Jobs and
Investment Act''.
SEC. 2. ENFORCEMENT OF REMEDIES AGAINST EXTRATERRITORIAL TAXES AND
DISCRIMINATORY TAXES.
(a) In General.--Subpart D of part II of subchapter N of chapter 1
is amended by adding at the end the following new section:
``SEC. 899. ENFORCEMENT OF REMEDIES AGAINST EXTRATERRITORIAL TAXES AND
DISCRIMINATORY TAXES.
``(a) Report on Extraterritorial Taxes and Discriminatory Taxes.--
``(1) In general.--Not later than 90 days after the date of
the enactment of this section, and not less frequently than
once every 180 days thereafter, the Secretary shall submit to
the appropriate committees of Congress a report which lists
each foreign country that has (as of the date of the submission
of such report) one or more extraterritorial taxes or
discriminatory taxes.
``(2) Additional items.--Each report submitted under
paragraph (1) shall include--
``(A) with respect to each extraterritorial tax or
discriminatory tax of any foreign country listed in
such report, a description of such tax including the
rate thereof and the dates on which such tax was
enacted and takes effect, and
``(B) if the Secretary determines that any foreign
country no longer has (as of the date of the submission
of such report) an extraterritorial tax or
discriminatory tax which was described in any prior
report submitted under this subsection--
``(i) the dates on which the permanent
repeal or termination of such tax was enacted
and takes effect, and
``(ii) whether such foreign country has (as
of such date) any other extraterritorial taxes
or discriminatory taxes.
``(3) Determination of when a foreign country has an
extraterritorial tax or discriminatory tax.--For purposes of
this section, a foreign country shall be treated as having an
extraterritorial tax or discriminatory tax during the period--
``(A) beginning on the earlier of the date on which
such tax is enacted or takes effect, and
``(B) ending on the later of the date on which the
permanent repeal or termination of such tax is enacted
or takes effect.
``(b) Engagement With Trading Partners on Extraterritorial Taxes
and Discriminatory Taxes.--The Secretary shall commence enhanced
bilateral engagement with each foreign country included in the report
submitted under subsection (a), in order to, as appropriate--
``(1) express the concern of the United States with respect
to the adverse trade and economic effects of tax policies that
violate bilateral tax treaties and international tax norms,
``(2) urge repeal of extraterritorial taxes and
discriminatory taxes that target United States persons, and
``(3) advise such foreign country of the remedial actions
under subsection (c).
``(c) Remedial Actions.--
``(1) Increased rate of tax on foreign citizens and foreign
corporations.--
``(A) Income taxes.--
``(i) In general.--In the case of any
applicable person for any taxable year
beginning after the applicable date, each
specified rate of income tax shall be increased
by the applicable number of percentage points.
``(ii) Specified rate of income tax.--For
purposes of this subparagraph, the term
`specified rate of income tax' means--
``(I) the rates of tax specified in
paragraphs (1) and (2) of section
871(a),
``(II) in the case of any
applicable person to which section
871(b) applies, each rate of tax in
effect under section 1,
``(III) the rate of tax specified
in section 881(a),
``(IV) in the case of any
applicable person to which section
882(a) applies, each rate of tax in
effect under section 11, and
``(V) the rate of tax specified in
section 884(a).
``(iii) Application of increased rates to
effectively connected income of nonresident
alien individuals limited to gains on united
states real property interests.--In the case of
any individual to whom clause (i) applies, the
tax imposed under section 1 on such individual
(after application of clause (ii)(II)) shall be
reduced (but not below zero) by the excess of--
``(I) the tax which would be
imposed under such section (after
application of clause (ii)(II)) if
FIRPTA items were not taken into
account, over
``(II) the tax which would be
imposed under such section if FIRPTA
items were not taken into account, and
clause (ii)(II) did not apply.
For purposes of this clause, the term `FIRPTA
items' means gains and losses taken into
account under section 871(b)(1) by reason of
section 897(a)(1)(A).
``(B) Withholding taxes.--
``(i) In general.--In the case of any
payment to an applicable person after the
applicable date, the rate of tax specified in
sections 1441(a) and 1442(a) (other than the 14
percent rate of tax specified in section
1441(a)) shall each be increased by the
applicable number of percentage points.
``(ii) Disposition of united states real
property interests.--In the case of any
disposition of a United States real property
interest (as defined in section 897(c)) by an
applicable person after the applicable date,
the rate of tax specified in section 1445(a)
shall be increased by the applicable number of
percentage points.
``(iii) Other dispositions and
distributions related to united states real
property interests.--In the case of any
disposition or distribution described in any
paragraph of section 1445(e) made after the
applicable date, each rate of tax in such
paragraph shall be increased by the applicable
number of percentage points if--
``(I) in the case of section
1445(e)(1), the foreign person referred
to in subparagraph (A) or (B) of such
section is an applicable person,
``(II) in the case of section
1445(e)(2), the foreign corporation
referred to in such section is an
applicable person,
``(III) in the case of section
1445(e)(3), the foreign shareholder
referred to in such section is an
applicable person,
``(IV) in the case of section
1445(e)(4), the foreign person referred
to in such section is an applicable
person,
``(V) in the case of section
1445(e)(5), the Secretary issues
regulations or other guidance providing
for such increase, and
``(VI) in the case of section
1445(e)(6), the nonresident alien
individual or foreign corporation
referred to in such section is an
applicable person.
``(C) Applicable person.--For purposes of this
paragraph, the term `applicable person' means--
``(i) any individual (other than a citizen
or resident of the United States) who is a
citizen of a foreign country listed in a report
under subsection (a),
``(ii) any foreign corporation (other than
a specified 10-percent owned foreign
corporation, as defined in section 245A(b))
which is created or organized in such a foreign
country or subject to the income tax laws of
such foreign country, and
``(iii) in the case of the application of
subparagraph (B)(i) with respect to section
1441(a), foreign partnerships to the extent
provided by the Secretary (and taking into
account the rules of section 1441(d)).
``(D) Applicable date.--For purposes of this
paragraph. the term `applicable date' means with
respect to any foreign country, the day after the 180-
day period beginning on the date of the submission of
the first report under subsection (a) which lists such
foreign country.
``(E) Applicable number of percentage points.--For
purposes of this paragraph--
``(i) In general.--The term `applicable
number of percentage points' means, with
respect to any foreign country--
``(I) with respect to the 1-year
period beginning on the applicable date
with respect to such foreign country, 5
percentage points,
``(II) with respect to the 1-year
period beginning with the close of the
period described in subclause (I), 10
percentage points,
``(III) with respect to the 1-year
period beginning with the close of the
period described in subclause (II), 15
percentage points, and
``(IV) with respect to any time
after the close of the period described
in subclause (III), 20 percentage
points.
``(ii) Application to taxable years.--For
purposes of subparagraph (A), the applicable
number of percentage points shall be determined
with respect to the date on which the taxable
year begins.
``(iii) Application to withholding taxes.--
For purposes of subparagraph (B), the
applicable number of percentage points shall be
determined with respect to the date of the
payment or disposition, as the case may be.
``(F) Effect of permanent repeal or termination of
extraterritorial and discriminatory taxes.--If the
Secretary determines under subsection (a)(2)(B)(ii)
that any foreign country no longer has any
extraterritorial or discriminatory taxes, then in the
case of any taxable year beginning, or payment or
disposition made, after the date of the submission of
the report which includes such determination, this
section shall be applied with respect to such foreign
country by not taking into account any report submitted
before such date.
``(2) Other remedies.--
``(A) Procurement.--
``(i) In general.--The President may
prohibit the Federal Government from procuring,
or entering into any contract for the
procurement of, goods or services from
applicable persons during the period beginning
on the applicable date and ending on the date
of any determination described in paragraph
(1)(F) by the Secretary with respect to such
foreign country.
``(ii) Congressional notification.--If the
President takes any action described in clause
(i), the President shall, not later than 30
days after the date of such action, notify the
appropriate committees of Congress of such
action.
``(B) Tax treaties.--
``(i) In general.--The Secretary shall take
into account the extraterritorial taxes and
discriminatory taxes of any foreign country in
assessing whether to enter into a bilateral tax
treaty with such foreign country or to
participate in negotiations with respect to
updating a bilateral tax treaty with such
foreign country.
``(ii) Congressional notification.--If the
Secretary begins negotiations with respect to
entering into or updating any bilateral tax
treaty with any foreign country that imposes
one or more extraterritorial or discriminatory
taxes, the Secretary shall, not later than 30
days after beginning such negotiations, notify
the appropriate committees of Congress of such
action. Such notification shall include a
description of the manner in which such taxes
are being taken into account as required under
clause (i).
``(C) Trade agreements.--
``(i) In general.--The United States Trade
Representative and the Secretary of Commerce
shall each take into account the
extraterritorial taxes and discriminatory taxes
of any foreign government in assessing whether
to enter into any free trade agreement or
Executive agreement on trade with such foreign
country.
``(ii) Congressional notification.--If the
United States Trade Representative or the
Secretary of Commerce begins negotiations with
respect to entering into any free trade
agreement or Executive agreement on trade with
any foreign country that imposes one or more
extraterritorial or discriminatory taxes, the
United States Trade Representative or the
Secretary of Commerce (as the case may be)
shall, not later than 30 days after beginning
such negotiations, notify the appropriate
committees of Congress of such action. Such
notification shall include a description of the
manner in which such taxes are being taken into
account as required under clause (i).
``(d) Definitions.--For purposes of this section--
``(1) Extraterritorial tax.--
``(A) In general.--The term `extraterritorial tax'
means any tax imposed by a foreign country on a
corporation (including any trade or business of such
corporation) which is determined by reference to any
income or profits received by any person (including any
trade or business of any person) by reason of such
person being connected to such corporation through any
chain of ownership, determined without regard to the
ownership interests of any individual, and other than
by reason of such corporation having a direct or
indirect ownership interest in such person.
``(B) Tax.--The term `tax' includes any increase in
tax whether effectuated by an increase in the rate or
base of a tax, by a denial of deductions or credits, or
otherwise.
``(2) Discriminatory tax.--
``(A) In general.--Except as otherwise provided in
subparagraph (B), the term `discriminatory tax' means
any tax imposed by a foreign country if--
``(i) such tax applies to items of income
that would not be considered to be from sources
within the foreign country under the rules of
part I of this subchapter if such part were
applied by treating such foreign country as
though it were the United States,
``(ii) such tax is imposed on a base other
than net income and is not computed by
permitting recovery of costs and expenses,
``(iii) such tax is exclusively or
predominantly applicable, in practice or by its
terms, to nonresident individuals and foreign
corporations or partnerships (as determined
under rules similar to paragraphs (4) and (5)
of section 7701(a) by treating the foreign
country as though it were the United States)
because of the application of revenue
thresholds, exemptions or exclusions for
taxpayers subject to such foreign country's
corporate income tax, or restrictions of scope
that ensure that substantially all residents
(other than foreign corporations and
partnerships (as so determined)) supplying
comparable goods or services are excluded from
the application of such tax, or
``(iv) such tax is not treated as an income
tax under the laws of such foreign country or
is otherwise treated by such foreign country as
outside the scope of any agreements that are in
force between such foreign country and one or
more other jurisdictions for the avoidance of
double taxation with respect to taxes on
income.
``(B) Exceptions.--Except as otherwise provided by
the Secretary, the term `discriminatory taxes' shall
not include any generally applicable tax which
constitutes--
``(i) a withholding tax on amounts
described in sections 871(a)(1) and 881(a),
``(ii) a value added tax, goods and
services tax, sales tax, or other similar tax
on consumption,
``(iii) a tax imposed with respect to
transactions on a per-unit or per-transaction
basis rather than on an ad valorem basis, or
``(iv) any other similar tax identified by
the Secretary for purposes of this
subparagraph.
``(3) Foreign country.--The term `foreign country' means a
foreign country or a dependent territory or possession of a
foreign country. Such term does not include any possession of
the United States.
``(4) Appropriate committees of congress.--The term
`appropriate committees of Congress' means--
``(A) the Committee on Finance and the Committee on
Foreign Relations of the Senate, and
``(B) the Committee on Foreign Affairs and the
Committee on Ways and Means of the House of
Representatives.
``(5) Secretary.--The term `Secretary' means the Secretary
of the Treasury or the Secretary's delegate.
``(e) Regulations and Other Guidance.--The Secretary may issue such
regulations or other guidance as may be necessary or appropriate to
carry out the purposes of this section, including regulations or other
guidance which provide for such adjustments to the application of this
section as are necessary to prevent the avoidance of the purposes of
this section.''.
(b) Clerical Amendment.--The table of sections for subpart D of
part II of subchapter N of chapter 1 is amended by adding at the end
the following new item:
``Sec. 899. Enforcement of remedies against extraterritorial taxes and
discriminatory taxes.''.
<all>
Introduced in House
Introduced in House
Referred to the Committee on Ways and Means, and in addition to the Committee on Oversight and Accountability, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Referred to the Committee on Ways and Means, and in addition to the Committee on Oversight and Accountability, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
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